McPier: DePaul events to bring in one-third of operating income at new arena

Rent, concessions, parking to bring in an estimated $1.2 million in the first year

May 21, 2013|By Kathy Bergen, Chicago Tribune reporter

(Tribune illustration)

DePaul University's use of a proposed $173 million McCormick Place arena for Blue Demons basketball and other events would generate about one-third of the nearly $3.6 million in event-related proceeds expected in the first year, convention officials said Monday.

McCormick Place officials, who expect the arena to attract conventions, assemblies and concerts, provided an accounting projection that showed the arena will break even the first year.

The university's rent is expected to total about $580,000, including $25,000 for each men's basketball game, with about 17 expected, and $10,000 for women's games, with 10 expected. Practice time would be free, but the university would pay $20,000 for other events, such as graduations.

The Metropolitan Pier and Exposition Authority, which owns McCormick Place and would own the arena, also would receive all revenue from DePaul event parking in 2,000 center spaces, ticket service fees, concession sales on everything but DePaul merchandise and revenue from 16 of 22 suites, with DePaul getting use of the other six.

"The total value … including rent, is something like $1.2 million a year," Jim Reilly, CEO of the authority known as McPier, said Monday at a meeting of the state-city agency's board.

Reilly made his remarks shortly before the board approved preliminary terms for the development of the arena, a multiuse events center that would open for the 2016-17 season.

DePaul would receive all revenue from the admission price portion of ticket sales and would own the naming rights and any revenue derived from that.

"I think they can probably do better on the naming rights because there's emotional attachment," Reilly said after the meeting. "They'll find some wealthy alum who runs a company."

DePaul would commit to scheduling all its men's home basketball games and a minimum of 10 women's home basketball games at the facility for 10 years.

McPier Board Chairman Jack Greenberg and member Frank Clark Jr. also serve on DePaul's board. Greenberg abstained from the vote, and Clark was not present during the vote portion of the meeting.

Board member Dan Hynes, whose father is registered as a lobbyist for DePaul, also abstained.

The arena plan calls for $70 million in construction costs to come from a McPier bond fund supported by hotel taxes and $70 million from DePaul. The city would pay for land acquisition costs with about $33.5 million from a city tax increment financing district, in which a portion of property tax revenue is set aside for economic development.

The site, in the 200 block of East Cermak Road, also is targeted for private development of a 500-room boutique hotel and restaurants.

On a site kitty-corner to this project, McPier proposes to build and own a $400 million convention hotel with 1,200 rooms. The city would use about $21.5 million from another TIF district to acquire the parcel. Construction would be financed with revenue bonds backed by hotel revenue proceeds.

The projects cannot move forward unless state lawmakers allow McPier bond funds to be used for future projects and extend the life of the TIF district that includes the arena site.

Also on Monday, the McPier board approved intergovernmental agreements with the city of Chicago that would authorize attorneys to pursue the necessary real estate through eminent domain lawsuits if negotiated deals cannot be struck, with the aim of obtaining the necessary parcels by year-end.

It also approved an intergovernmental agreement to allow $360,000 in TIF funds to be used to upgrade the streetscape in the 300 block of East Cermak, immediately east of the arena block. This privately owned block also is viewed as ripe for redevelopment as part of an entertainment district.